Sequester-driven budget cuts to Medicare are threatening to spur massive job cuts in the healthcare industry.

And the pain doesn't stop there – the sequester cuts are already making healthcare harder to obtain for some Medicare patients.

Unfortunately, this is just the beginning. The longer Congress allows sequestration to continue, the deeper the cuts will go and the more widespread their impact.

When President Barack Obama and Congress failed to reach agreement on $1.2 trillion in cuts to federal spending before March 30 — as mandated by the Budget Control Act of 2011 — the sequester kicked in.

After the cuts went into effect on April 1, hospitals, doctors, insurers, prescription drug plans, and other healthcare providers immediately felt the impact.

In short, the sequester is delivering precisely the kind of broad, damaging and indiscriminate cuts that politicians warned would happen.

And as each day passes, the drastic consequences grow worse.

How the Sequester Is Costing Jobs

To bickering pundits in Washington, the sequester seems like an abstract economic concept that may knock a point or two off the gross domestic product (GDP).

But on Main Street, the pain is real.

Medicare providers that offer Advantage plans (Part C) and prescription drugs (Part D) felt the effect of the cuts right away because they get paid by Medicare on the first business day of every month.

Meanwhile, payments for services under Medicare Hospital Insurance (Part A) and Medigap Insurance (Part B), will take longer to trickle down through the system.

And while Medicare payments will be slashed by a relatively small $3 billion this year, budget reductions will lop off a whopping $123 billion from 2013 to 2021, according to the Congressional Budget Office (CBO).

That means healthcare employment will be taking a big hit.

According to a study released by the American Medical Association, the American Hospital Association and the American Nurses Association, job losses will soon spread like a virus across the economy.

Healthcare-related industries will lose more than 496,000 jobs in just the first year of the sequester, and the number of lost jobs will reach 766,000 by 2021, the study said.

The damage will be widespread, with hospitals and physicians' offices experiencing the worst losses, followed by dentists, nursing and residential care facilities and diagnostic labs. Suppliers will feel the pain later.

The nursing profession may be in for a particularly rough ride.

Nursing facilities say they are planning to lay off more than 20,000 registered nurses, licensed practical nurses, certified nursing assistants, therapists and other staff, according to a survey by The Alliance for Nursing Home Care.

More than half said they plan to reduce benefits, and roughly 75% said they will modify wages.

Sequester Strikes Medicare Cancer Patients

You see, under sequestration, the government reduced funding for chemotherapy and other drugs critical to cancer patients.

In fact, the entire 2% reduction must come out of oncologists' overhead for storing and administering the drugs. That puts a significant burden on cancer clinics.

"When I look at the numbers, they don't add up…we can't stay open if we don't cover costs," Ralph Boccia, director of the Center for Cancer and Blood Disorders in Bethesda, MD, told the Washington Post.

Clinics that remain open will likely be forced to drastically reduce the number of patients they see.

North Shore Hematology Oncology Associatesin Long Island, NY, recently announced that one-third of their 16,000 Medicare patients would have to seek treatment elsewhere, according to the New York Daily News.

Most will turn to hospitals, which may or may not have the capacity to meet the increased need. That means some cancer patients may simply have nowhere to turn.

On top of that, patients fortunate enough to find a nearby hospital to treat them will pay an average of $650 more per year for treatment, according to the actuarial firmMilliman Inc.

Some patients may not be able to foot the bill.

"People that can't afford their medications just don't take them … and they wind up dying," cancer patientHelen Jeton-Mantooth told the Center for American Progress.

Sequester Cuts Add to Costs

What's more, the government's attempt to save money by cutting Medicare may actually backfire when everything is said and done.

The Milliman study says the government could pay an average of $6,500 more per year for cancer patients in a hospital versus a community clinic.

So not only will some cancer patients will be left out in the cold – American taxpayers will end up paying more.

As a "big picture" guy I have come to realize that any cuts (or reductions in growth) will cause someone somewhere to be laid off or some service to be reduced. Since employment trumps any other consideration (like long term survival of macro economy, for example) then it is impossible to cut anything without a dissertation on loss of jobs and services. The natural extension of this is that there is nowhere to go but expansion of everything regardless of the long term consequences. The ultimate question remains: will it work (to endlessly expand spending, services, employment etc)??? I have lived my life under continual expansion and it appears to be working. But I still have my doubts. The immediate, concrete calculable effects of any reduction in growth will have such political power that abstract arguments about long term interest will be swamped and lost. And so goes evolution. I think I will live to see the end game.

This article is an excellent example of liberalism gone awry. Never cut government programs because someone is dependent upon government somewhere. Ultimately what is preserved are those who are dependent upon government, the takers not the producers. Sure, this works for some time when the country is exceedingly productive, but in the long run the transfer of wealth has negative effects on all sectors. What is forgotten in this narrow view article is that government produces nothing, it merely transfers from one sector to another. The author has forgotten the jobs lost by virtue of having taken money from one sector in order to feed another. Then there is the tremendous inefficiency of government programs which is referred to as a dead weight loss. Anyway, this article is reallly a very ignorant piece of economic reasoning, and more a liberal talking point type political argument. Has the author ever considered the tremendous loss of quality of medical care as soon as the government takes over medical care? Socialism has failed in every country in which it has been tried. Quite elementary, so why are these authors so blind?

So many are cheering for the healthcare reform, because they are only thinking of their pocket books. This article puts it all into prospective. What it doesn't let you know, is that hospitals across the nation have already been losing money to Medicare in yet another goverment program called RAC started almost four years ago. Medicare has gone back over old claims and taking back the money today, in which they paid three years ago. Example, a hospital was paid by Medicare $13, 000 for John Doe's over night admission. Three years later Medicare comes and says, hey, I don't think we should have paid for John Doe's visit to your hospital, so We are taking that back, and you can appeal to us to get it back. Hospitals are losing anywhere between $500K and $2 million every month on average. Month, not year! Now Hospitals have to deal with a 2% reduction? To understand how much that is, take John Doe's payment of $13K. Medicare will reduce that payment by $260. You figure there are at least 5 Medicare admission per day. That adds up to be a lot of money. This acticle hits the mark, dead on. Hospitals will start closing soon and much more than just half a million jobs will be lost. Yes, I do work in a hospital and I have to deal with the Medicare RAC program.

By submitting your email address you will receive a free subscription to Money Morning and receive Money Morning Profit Alerts. You will also receive occasional special offers from Money Map Press and our affiliates. You can unsubscribe at anytime and we encourage you to read more about our privacy policy.

You can view our VQScore top-rated stocks now by entering your email below:

By submitting your email address you will receive a free subscription to VQScore and occasional special offers from Money Map Press and our affiliates. You can unsubscribe at anytime and we encourage you to read more about our privacy policy.

Today's Markets

DJIA37.07(0.14%)27,219.52

NASDAQ-17.75(0.22%)8,176.71

S&P-2.18(0.07%)3,007.39

ABOUT MONEY MORNING

Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

By submitting your email address you will receive a free subscription to Money Morning and receive Money Morning Profit Alerts. You will also receive occasional special offers from Money Map Press and our affiliates. You can unsubscribe at anytime and we encourage you to read more about our privacy policy.